Daily Form October 31, 2007

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WEDNESDAY OCTOBER 31, 2007       06:36 ET

The S&P 500 (^SPC) lost ground yesterday after breaking above a trendline through the highs in Monday’s session and also regaining its foothold above the trendline through the lows that I discussed in Monday’s commentary.

The index now sits in an interesting neutral zone about half way between the Oct 9th high and the October 19th low as the markets prepare for today’s FOMC announcement.

Let’s see if the market celebrates when, as expected, it gets what it has been wishing for.


The chart for the CBOE Volatility Index (^VIX) is revealing a triangular pattern which is often a precursor to a strong directional move.

The consumer discretionary sector fund, XLY, has a bearish looking pullback pattern that may well find resistance at the $37 level.

The oil services sector fund OIH is also revealing a bear flag formation that was breached to the downside with yesterday’s decline of more than four percent.

TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY OCTOBER 31, 2007



The patterns identified below should be considered as indicative of eventual price direction in forthcoming trading sessions. None of these setups should be seen as specifically opportune for the current trading session.
For full details on time horizons, risk management and hedging techniques please visit http://www.tradewithform.com

DRYS  Dryships  

In view of today’s market moving news and potential for chaotic trading conditions I am avoiding any new recommendations. I would like to point to a comment that I made in my weekend’s commentary - "Another group of stocks that have risen very dramatically and that may be due for a rest are the shipping companies and the chart for Dryships (DRYS) is revealing signs of waning momentum and fading money flow."

The 17.5% drop yesterday was an ample reward for the short trade that I entered during Monday’s session.



EXM  Excel Maritime  

Excel Maritime (EXM), also in the shipping sector, even outstripped Dryships’rewards on the short side with a 20% drop yesterday. Such large corrections in a single day are not too surprising given the run-ups that these stocks have enjoyed but,if the declines become even steeper, they may be pointing to a more measured re-appraisal of impending global economic activity.



CPHD  Cepheid  

Alas not all of the short candidates mentioned in the weekend commentary performed in line with expectations and Cepheid (CPHD) was a big riser yesterday and blew through my stop with a more than nine percent rise on the day.



HAL  Halliburton Company  

Haliburton (HAL) which I discussed on the short side in the weekend’s commentary has dropped more than five percent this week so far and although I exited the position on yesterday’s close this could have further to fall in the intermediate term.

Daily Form October 30, 2007

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TUESDAY OCTOBER 30, 2007       05:59 ET

After several sessions with large intraday swings the Nasdaq 100 (^NDX) had a relatively quiet session recording its smallest range in more than two weeks. The resulting doji star candlestick reveals a range contraction session that almost certainly is due to the impending interest rate decision and can also be the precursor to a strong directional impulse.

Anecodotally one of the things that caught my eye this morning is the fact that as a consequence of the exalted performance by India’s stock market in recent days the industrialist Mukesh Ambani is now the world’s richest person surpassing Bill Gates for the first time.

Mr Ambani’s Reliance Industries, has been on a roll recently and after the Mumbai Sensex (^BSESN) index’s close just short of the 20,000 level yesterday, the net worth of its chairman and managing director, according to reports, rose to $63bn.


The investment banking sector (^XBD) has been meandering within a relatively narrow trading range and the volatility bands are constricting along with all three key moving averages which are converging. This condition suggests that a directional breakout could be imminent and the catalyst may be the FOMC decision.

A similar argument to the one just noted for the investment banks could be made for the longer term Treasury instruments.

The chart shows a box pattern with only thirty basis points covering the spread in yields since early September. While this confined range might be prolonged several factors could force a more definitive move beyond this box. Dollar weakness might limit the possibilites of a break below 4.4% but a weak employment report on Friday could certainly see this floor being tested.

TRADE OPPORTUNITIES/SETUPS FOR TUESDAY OCTOBER 30, 2007



The patterns identified below should be considered as indicative of eventual price direction in forthcoming trading sessions. None of these setups should be seen as specifically opportune for the current trading session.
For full details on time horizons, risk management and hedging techniques please visit http://www.tradewithform.com

SCHN  Schnitzer Steel Industries Inc  

In my weekend commentary I noted that Schnitzer Steel (SCHN) appeared to be poised for a breakout in the context of a rather constructive chart pattern but also cautioned that the earnings release expected yesterday had the capacity to disappoint. Traders were not shy in showing their dissatisfaction with the announcement as the stock plummeted by more than 15%. This chart underlines the reason why it is always prudent not to be too confident in anticipating directional moves from technical characteristics in the midst of the quarterly earnings seasons.



FCS  Fairchild Semiconductor International  

Fairchild Semiconductor (FCS) closed yesterday on top of all three moving averages that we track. I am intrigued by the strong impulse that lifted the stock on October 18th on very heavy volume and would be monitoring the stock intraday for signs of resumed buying pressure.



DVA  DaVita Inc.  

Momentum fatigue is showing on the chart for Davita (DVA).

Daily Form October 29, 2007

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MONDAY OCTOBER 29, 2007       06:26 ET

The S&P 500 (^SPC) has recovered from the violation of the trend line that I have drawn and is now poised to re-cross the extension of that line. In the current environment I would not be surprised to see another move back to the recent highs either on the back of some post easing euphoria or on any decline in the price of crude which will, such is the degree of optimism, be interpreted as profoundly bullish for the economy!


Last week I commented on the rather uneasy and nervous quality to sentiment that is being revealed on the chart patterns for the Nasdaq 100 index (NDX). Friday’s long lower tail with a close at the top of the recent range underlines the fact that there is relatively weak conviction on the short side at the moment but also, in view of the impending FOMC meeting, a hesitation to push too hard for an upward break to new multi-year highs.

Reviewing the overseas action as this is being written, the rallies in Asia and Europe - the Hang Seng was up by almost four percent, Mumbai by more or less the same percentage and at one point an almost two percent rally for the UK’s FTSE - it is hard not to escape the conclusion that asset managers see much greater risk in getting left behind and delivering sub standard returns than extending themselves too far in such elated and febrile market conditions.

This patently bullish behavior is even more remarkable in the face of increasing geo-political tensions involving Iran, the possibility of $100 crude as well as a lamentable performance by the world’s reserve currency.

The homebuilding sector fund XHB has been showing some signs of vitality again, possibly as those who have enjoyed the ride down are starting to retire short positions. The sector is poised to break above a long term downward trendline which almost coincides with the 50 day EMA. If there is decisive penetration through these levels there could be a tradable recovery rally, although I would not recommend getting too comfortable on the long side.

TRADE OPPORTUNITIES/SETUPS FOR MONDAY OCTOBER 29, 2007



The patterns identified below should be considered as indicative of eventual price direction in forthcoming trading sessions. None of these setups should be seen as specifically opportune for the current trading session.
For full details on time horizons, risk management and hedging techniques please visit http://www.tradewithform.com

ERES  eResearch Technology Inc  

eResearch Technology (ERES) may pull back further to the 20 day EMA level close to $11.50 but the pattern suggests that it could be vulnerable to further selling pressure.



SGP  Schering-Plough Corp.  

Schering Plough (SGP) has pulled back in quite a steep channel on subdued volume and may find rejection at the intersection of two moving averages above Friday’s close.



BZH  Beazer Homes Inc.  

Beazer Homes (BZH) has one of the most positive charts amongst the homebuilders and has now cleared the 50 day EMA hurdle.



PLCM  Polycom Inc  

Polycom (PLCM) has entered a congestion pattern after several strong upward sessions. The 200 day EMA just above $30 seems like a plausible target for short term traders.

Daily Form October 26, 2007

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FRIDAY OCTOBER 26, 2007       03:53 ET

The rather skittish tone that has characterized trading during recent sessions was again in evidence in yesterday. The broad equity indices diverged with the large cap DJIA and S&P 500 ending essentially unchanged but the Nasdaq 100 (^NDX) experienced the most attrition with a 1.2% decline and the small cap Russell 2000 (^RUT) suffered a smaller decline of 0.6%. The index closed in the midst of two key moving averages - the 50 and 200 day EMA’s and just six points above the pivotal 800 level.

One of the more intriguing developments yesterday was Warren Buffet’s comments about an overheated Chinese market and the subsequent 5% drop in Shanghai. He was also reported as making the ironic remark in relation to cashing out of one of his very rewarding investments in China that he had sold too soon. This echoes the famous quote from the first Lord Rothschild who was asked what the key to his investing success was and habitually replied "I always sell too soon." Sage advice for an investor with a long time frame but advice that doesn’t really help the trader looking for good short trades. In that regard the Hang Seng Index (^HSI) finally mustered the nerve to break above 30,000 as this is being written, and those trying to pick a top here keep running for cover.


The S&P 500 (^SPC) took an erratic intraday excursion yesterday and ended more or less where it had started. The close was right on the 50 day EMA providing little insight as to the probable near term direction.

The leadership being provided by the tech stocks has run into some strong headwinds with the recent sell off in the semiconductor sector. Broadcom’s earnings disappointment from earlier in the week has contributed to a rather steep fall for the exchange traded sector fund, IGW, which has now retreated to the mid August low.

TRADE OPPORTUNITIES/SETUPS FOR FRIDAY OCTOBER 26, 2007



The patterns identified below should be considered as indicative of eventual price direction in forthcoming trading sessions. None of these setups should be seen as specifically opportune for the current trading session.
For full details on time horizons, risk management and hedging techniques please visit http://www.tradewithform.com

SYNA  Synaptics Incorporated  

Mentioned here recently in the context of its negative divergences, Synaptics (SYNA) after appearing to be able to defy gravity, has corrected by almost ten percent in the last two sessions.



HON  Honeywell International  

The recent pullback/bounce in Honeywell after the plunge down on October 19th could find renewed selling pressure close to the $60 level.



QCOM  QUALCOMM Inc.  

Qualcomm (QCOM) has a mini bear flag formation as it straddles all three moving averages.



RYL  Ryland Group Inc  

Ryland Group (RYL) peeked and closed just above a congestion range on heavy volume yesterday. The underlying momentum and money flow also look positive.

Daily Form October 25, 2007

CLIVE CORCORAN WILL BE A GUEST ANALYST ON CNBC"s EUROPEAN CLOSING BELL TODAY

TRADE WITH FORM
Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
THURSDAY OCTOBER 25, 2007       05:50 ET

In yesterday’s commentary I discussed the market’s resilience and in particular that shown by the Nasdaq 100 (^NDX). Early in the trading day yesterday I began to sense that this comment might have been a case of poor timing as it seemed that the fund managers that have been piling into the large techs could be starting to lose their nerve. In fact the index showed heroic resilience yet again as it almost erased all of the early losses from the session to come to rest very close to the gap down opening price. This is all the more remarkable in that certainly some fund managers were dumping constituents of the index as can be seen in the carnage for Broadcom (BRCM) down 17%, Altera (ALTR) down 15.7% and Amazon (AMZN) down 12%.

The restorative powers of the potential for further fed easing are providing a powerful astringent to the bears who keep trying to get some momentum going on the downside. Even with Merrill Lynch’s disturbing news about write-offs and equally disturbing news about plummeting housing prices and sales levels the Dr Pangloss adherents keep reminding us that all this bad news can only be good news for the markets.

I shall be a guest analyst on CNBC’s European Closing Bell this afternoon.


The S&P 500 (^SPC) also experienced a strong reversal as the intraday low yesterday penetrated below Monday’s low but again the index closed more or less at the opening price and right in line with the 50 day EMA. As noted yesterday the index could run into some chart resistance at the 1530 level which marks the 20 day EMA and above that at 1540 which represents last Thursday’s closing value.

The FTSE 100 index is off to a strong start in Thursday’s trading and is up by more than one percent after hesitating on October 12th within two points of its June high. As the chart reveal the index came down to a pivotal level yesterday that, if it was to break, would violate the up trend line through the lows since mid August.

The Bank Of England published its periodic Stability report today (available at the Bank’s website) and it contained some unusually pointed comments regarding the risks that it perceives are facing the UK economy. The real estate woes that are now manifesting themselves in the US could be on the horizon for the UK and the growing evidence of tighter credit conditions will not be good news for the over-leveraged UK consumer sector.

TRADE OPPORTUNITIES/SETUPS FOR THURSDAY OCTOBER 25, 2007



The patterns identified below should be considered as indicative of eventual price direction in forthcoming trading sessions. None of these setups should be seen as specifically opportune for the current trading session.
For full details on time horizons, risk management and hedging techniques please visit http://www.tradewithform.com

WYNN  Wynn Resorts Limited  

Wynn Resorts (WYNN) is revealing a succession of lower highs.



SLB  Schlumberger Limited  

Schlumberger (SLB) is gradually pulling back from Monday’s plunge and the stock will be on my radar in coming sessions for evidence that the bounce is faltering.



FRE  Freddie Mac  

The monthly chart for Freddie Mac (FRE) shows that the stock has now broken down to levels not seen since 2003.



AAPL  Apple Computer Inc.  

The chart for Apple (AAPL) over the last two sessions reveals a very similar pattern to that for the Nasdaq 100 (^NDX) and in some ways the stock embodies the hopes and aspirations for the technology sector as a whole.

There is no denying that Steve Jobs’ Apple is a wonderful business success story but we shall have to see whether iPods and iPhones and other examples of leading technology can lead the market through the minefields of dollar weakness, troubled real estate loans and SIV’s that will have to mark their holdings at some point to the market rather than their more benign scenario models

Daily Form October 24, 2007

CLIVE CORCORAN WILL BE A GUEST ANALYST ON CNBC"s EUROPEAN CLOSING BELL TOMORROW

TRADE WITH FORM
Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
WEDNESDAY OCTOBER 24, 2007       06:26 ET

The Nasdaq 100 (^NDX) proved just how resilient this market can be as the tech heavy index has not only taken last Friday’s sell-off completely in its stride but, in a striking turnaround, it managed to close yesterday at a seven year high. Apple’s blowout numbers contributed to the 2.2% gain and the QQQQ proxy managed to underline the gain with volume of 162 million shares which was above the fifteen day moving average.

In addition to a series of upbeat earnings being achieved by several of the index’s constituents, fund managers are amassing large stakes in the large cap tech stocks also as a play on the insulation from dollar weakness enjoyed by this index’s multi-national companies. Investors are continuing to be shy of largely US based businesses that do not enjoy currency diversification in their revenues, and with the ongoing aversion to the financial sector, many of the leaders from the late 90’s are beginning to shine again.


A more restrained performance was seen from the S&P 500 (^SPC) which continued to recover from last week’s downside action and registered a 0.9% gain. The index could run into some chart resistance at the 1530 level which marks the 20 day EMA and above that at 1540 which represents last Thursday’s closing value.

From a technical perspective the Russell 2000 (^RUT) has behaved somewhat predictably in relation to specific chart levels.

After testing the area below the pivotal 800 level in early trading on Monday the index came back to close that session almost exactly at the 50 day EMA.

Yesterday’s one percent extension of the recovery brought the index to another challenge at 825 which marked the close preceding last Friday’s dive of more than three percent.

TRADE OPPORTUNITIES/SETUPS FOR WEDNESDAY OCTOBER 24, 2007



The patterns identified below should be considered as indicative of eventual price direction in forthcoming trading sessions. None of these setups should be seen as specifically opportune for the current trading session.
For full details on time horizons, risk management and hedging techniques please visit http://www.tradewithform.com

DOX  Amdocs Limited  

Amdocs (DOX) reveals a long lower tail formation where the intraday lows also coincided with the previous lows from August. The above average volume and doji star pattern could be pointing to a short term exhaustion in the selling.



CPHD  Cepheid  

The chart for Cepheid (CPHD) reveals a pullback pattern following the vigorous selling from October 15th and the climb within the channel since then has been marked by subdued volume. Yesterday’s 2.8% move up was notable for its very anemic volume.

Daily Form October 23, 2007

TRADE WITH FORM
Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
TUESDAY OCTOBER 23, 2007       06:06 ET

The Nasdaq Composite (^IXIC) along with the other broad equity indices sold off in the early going yesterday and touched 2698 as its intraday low. In finding support at this level, and concluding the session with a 1.1% gain, the upward breakout above the July highs that was achieved on October 1st is still intact. The suspicion is, however, that a more robust testing of this level will be attempted in coming sessions.


The Treasury market has surrendered all of the gains in yields that pushed the ten year note to the top end of its range in June. Back then it appeared that a very long term trendline dating back almost seventeen years was about to be violated as yields pushed towards 5.25%.

Yields, across the maturity spectrum, have now retreated and the ten year note, as the weekly chart below reveals, is now tagging the 4.4% level which marks the bottom of a range that has persisted for more than two years. The growing concerns about an economic downturn suggest that the odds are increasing that this lower boundary may not hold.

The energy sector fund, XLE, reveals the kind of momentum divergences that often precede a tradable correction.

TRADE OPPORTUNITIES/SETUPS FOR TUESDAY OCTOBER 23, 2007



The patterns identified below should be considered as indicative of eventual price direction in forthcoming trading sessions. None of these setups should be seen as specifically opportune for the current trading session.
For full details on time horizons, risk management and hedging techniques please visit http://www.tradewithform.com

XHB    

The homebuilding sector,as represented by the exchange traded sector fund, XHB, mounted a strong counter trend rally yesterday with several of the constituent stocks up by more than five percent. The sector may rally up towards the 50 day EMA in the near term but it is doubtful whether, given the continuing gloom and doom about the sector, it is ready for a sustained basing pattern yet.



PHM  Pulte Homes Inc.  

The risk/reward ratio on a counter trend bounce taking Pulte Homes (PHM) up towards the 50 day EMA would seem to be favorable.



WFC  Wells Fargo and Company  

Another bounce candidate that I would not be looking to make a long term commitment to is Wells Fargo (WFC) which could see a return to the 200 day EMA in the near future.

Daily Form October 22, 2007

TRADE WITH FORM
Profit Patterns and Risk Management For Active Traders
Trade successfully without having to be right about the underlying market direction
MONDAY OCTOBER 22, 2007       07:18 ET

The intuition on Friday that the market had reached an inflection point at which a strong directional move was imminent turned out to be more prescient than I thought. The equity market found that it had run out cover in the face of continued adversity in sections of the money markets, burgeoning energy prices, weakness in the dollar and the catalyst for the bears to run amok was Caterpillar’s downbeat earnings statement and forecast. The company’s ominous assessment of economic prospects proved too hard a knock for the Dr Panglossian spin machine and caused a lot of analysts and fund managers to see a half empty glass that had previously appeared to be half full.

The Nasdaq Composite (^IXIC) took a 2.6 percent hit which was in line with the subset index of the Nasdaq 100 (^NDX) but as the charts reveal the larger composite index has now retreated back towards a retesting of the breakout at 2705 that occurred on October 1st.

The reaction in the overseas markets to Friday’s action in the US has been rather heterogeneous with the Hang Seng (^HSI) in Hong Kong feeling most of the pain with a 3.6% decline but the Bombay Sensex (^BSESN) ended Monday’s trading with a minor gain. European markets are holding with one percent losses as this is being written which suggests that some traders may be taking the view that Friday’s action on Wall Street may have been a bit overdone.


The Russell 2000 (^RUT)which experienced a more than three percent decline on Friday and five percent for the whole of last week, came to rest just below the pivotal level of 800. This level has provided both strong support and resistance over recent months and I shall be watching keenly to see if we can hold at or close to this level. If we cannot find a sustainable support near 800 then I would have to become much less sanguine about the intermediate outlook for equities, despite favorable seasonal factors. In terms of the larger picture it is also worth citing the fact that this index, unlike most other broad equity indices, failed to reach a new multi-period high during the rally off the August lows.

The weekly chart of the banking index (^BKX) shows that the early 2006 lows have now been taken out in addition to the 2007 lows. We may need to return to the October 2005 low close to the 95 level before the sector attracts some bargain hunters.

TRADE OPPORTUNITIES/SETUPS FOR MONDAY OCTOBER 22, 2007



The patterns identified below should be considered as indicative of eventual price direction in forthcoming trading sessions. None of these setups should be seen as specifically opportune for the current trading session.
For full details on time horizons, risk management and hedging techniques please visit http://www.tradewithform.com

USB  U.S. Bancorp  

US Bancorp (USB) dropped below key moving averages in Friday’s sell off and the chart suggests that a re-visit to the August low seems probable.



MER  Merrill Lynch and Co. Inc.  

Merrill Lynch (MER) closed below the summer lows and has headed back towards the June 2006 low below $66. As with the banking sector index that we reviewed above there could be further attrition as the stock may need to seek out support closer to the October 2005 levels just below $60.



ATK  Alliant Tech Sys Inc  

Alliant Tech Systems (ATK) has dropped below a clearly defined buy channel and also dropped below the 50 day EMA. The larger time frame reveals an extended pullback from the August selling. Perhaps not altogether a positive sign is that Friday’s volume was not particularly aggressive.



LOW  Lowe"s Companies Inc.  

In last Tuesday’s commentary I suggested that Lowe’s Companies (LOW) which had broke down from a bear flag pullback pattern may not find real support until the mid August low near $26 is tested. In Friday’s sell off the stock reached almost exactly to that level and the trade would have delivered a seven percent return in four days.



GS  The Goldman Sachs Group Inc.  

I would be surprised to see Goldman Sachs trade much below $210 again in the near term unless, of course, the correction gets quite nasty.



INTC  Intel Corporation  

The chart for Intel (INTC) showed relative strength during last week’s weakness and some constructive patterns appear on the chart.